Dolla Financial plans capital raise ahead of festive season
CEO of Dolla Financial Group Kenroy Kerr is hopeful the microlending company will execute fund-raising plans before the close of its third quarter which ends in September 2024 — a move aimed at providing the company with a much-needed capital boost ahead of the busy Christmas season.
The numbers aren’t yet confirmed but Dolla Financial is expected to raise some $2 billion in capital to satisfy consumer demand for loans, while staying on track with its growth plans. Following its listing on the Junior Market of Jamaica Stock Exchange in June 2022, when it raised $250 million from its initial public offering, the company has since raised $1.17 billion through a bond offering.
Based on the projected capital raise Dolla appears to be heading back to the bond market. The capital raise is being organised by financial partner Mayberry Investments Limited.
“I don’t want to give too much insight in terms of the exact amount that we are in the process of raising or plan to raise in this quarter, based on the fact that we need to notify respective regulatory bodies and so forth, but I know that we are in a position to lend out $1.5 to $2 billion,” Kerr said during an online investor briefing hosted by Learn, Grow and Invest on Wednesday.
The Dolla Group, which includes subsidiary Ultra Financier Services, registered net profit of $284 million for the first half of 2024, 25 per cent up from $227 million in the corresponding period of 2023.
Its aggressive sales strategy and sales team were credited for the performance but the company has also been holding a firm grip on expenses and non-performing loans, which now account for just eight per cent of its loan book.
“We don’t have that culture where we sit in an office and just wait on customers to walk through the door. We are the kinda of company that goes out there, form partnerships that we believe are key in adding value to the business,” the CEO said regarding Dolla’s sales strategy.
In line with the growth in sales Dolla’s loan book grew to a record $2.99 billion, up 17 per cent year on year, while cash and cash equivalents also rose 40 per cent year on year to $67.7 million.
“We have mentioned in previous calls that the aim is to strengthen our cash position as at the end of the quarter. We have an increase here but it’s not the increase that we really wanted so we are still on our path to increasing our cash position. Hopefully when we get to Q3 and Q4 we will see a stronger cash position,” Chief Financial Officer Trevene McKenzie said.
Globally, businesses typically see an uptick in business during the festive season. The same holds for the local market, especially in retail and service industries like microlending. Christmas is marked by higher consumer spending on gifts, decorations, travel, and festive activities — and Dolla is positioning itself to capture business from new and existing customers.
The microlender may also be seeking to capitalise on the ‘higher for longer’ interest rate environment. Higher interest rates from traditional banks can make it harder for individuals and small businesses to obtain loans from these institutions, thereby driving more borrowers to microfinance companies which might offer more accessible lending terms.
“Our mission has always been to empower individuals, empower businesses…provide them with accessible and reliable financial solutions,” Kerr said.
Last month Dolla opened its 11th branch in Morant Bay, St Thomas, positioning itself as a strong contender for business in the developing parish. Already, it has started adding taxi operators to its growing list of clientele.
“With this, we have taken another step forward in bringing our business closer to the customers. On the same day of launching the branch we also launched an updated version of our one and ready loan product.
“The campaign really targets persons in the transportation centre — PPV and JUTA operators — and will run until December 31. Every successful applicant who purchased a vehicle through us for PPV purposes will have a chance to win a second vehicle come January 31, 2025,” he explained regarding business in the parish.
The composition of Dolla’s loan portfolio is changing amid the scaling down of business in Guyana and expansion in home country, Jamaica. Some 79 per cent of its loan portfolio now consists of secured business loans while another 10 per cent is unsecured personal loans.
A breakdown by sector shows that Dolla largely deals in loans for the real estate and construction sector, at 29 per cent, followed by truck haulage and transportation which make up another 25 per cent of its loan portfolio. Business through segments ‘other services’ and the ‘retail industry’ contributes 15 per cent and 14 per cent, respectively.
Kerr is bullish on checking some growth initiatives off the company’s list before the close of 2024.
“Over the last several months we have been focusing a lot on fund-raising. The company is in the growth phase, and in order for us to grow and grow at the levels that our investors have grown accustomed to, then funding is needed,” he said.
He added that Dolla remains dedicated to forging strategic partnerships to boost sales and disbursements while highlighting that the Dolla Group will continue to focus on operational efficiency, risk management, and prudence in all aspects of its operations.
“A key area for us [is] automation of our internal processes so that we can scale easier,” he said.